Many people know that a patent conveys with it the light to make, use, sale and offer to sell an article covered by the patent, or the use of a method covered by the patent.  The right, however, is not absolute.  U.S. Patent law acts to limit the ability of a patent owner to control the article downstream from the first sale.  In other words, a patent owner cannot prevent the resale or dictate the price of resale of an article after the original sale.  Rather, the patent rights has been "exhausted."

In Quanta Computer, Inc. v. LG Electronics, Inc. the Supreme Court upheld the applicability of the first sale doctrine to methods.  Intel obtained a license from LG to make computer chips that performed part of a patented function.  The chips, however, were useless without a bus and other components.  Intel sold the chips to Quanta who used them in computers.  LG then sued claiming that Quanta was infringing the patent.

The Supreme Court found that LG's patent rights were exhausted by the original license to Intel and that LG had no right to sue Quanta for infringement.

The Supreme Court's decision raises significant questions that patent owners should consider prior to entering into license agreements where the licensee has anything over than complete rights to sell the licensed product.